CALGARY, ALBERTA–(Marketwired – Dec. 9, 2013) – Canadian Oil Sands Limited (COS) (TSX:COS)(OTCQX:COSWF) today announced 2014 capital expenditures of $1.1 billion, with the majority of expenditures directed to the previously disclosed major projects.
COS is estimating a production range for Syncrude of 95 million to 110 million barrels in 2014; equivalent to 34.9 million barrels to 40.4 million barrels net to COS’ 36.74 per cent interest in the project.
2014 Capital Program
Since 2011, COS has been investing in several major projects directed at maintaining a strong base of crude oil production over the next one to two decades and improving operational efficiency and environmental performance.
The Aurora North Mine Train Relocation and the Aurora North Tailings Management projects have been completed ahead of schedule and under budget in 2013. The Mildred Lake Mine Train Replacement project has reached an estimated 80 per cent completion and is targeted to be in-service in Q4 2014. COS estimates expenditures of $355 million on this project in 2014.
The Centrifuge Tailings Management project has reached an estimated 70 per cent completion and is targeted to be in-service in the first half of 2015. COS estimates it will spend $298 million on this project in 2014.
COS also estimates spending about $0.4 billion, or $9.35 per barrel, on regular maintenance capital in 2014 to maintain the Syncrude facility and support continued operations.
“I am very pleased with Syncrude’s progress on our major projects. With two projects complete, and the remaining two tracking on budget and schedule, the risk in this program has significantly declined. Through our investment in new mining infrastructure and proven equipment to reduce the associated environmental impact of tailings, we are positioned very competitively to generate long-term free cash flow,” said Marcel Coutu, President and Chief Executive Officer.
| 2014 Capital Expenditures | |||
| (millions of Canadian dollars) | Syncrude | COS Share | |
| Major Projects | |||
| Mildred Lake Mine Train Replacement | 965 | 355 | |
| Centrifuge Tailings Management | 812 | 298 | |
| Total Major Projects | $1,777 | 653 | |
| Regular Maintenance | 983 | 361 | |
| Capitalized Interest | n.a. | 83 | |
| Total Capital Expenditures | $2,760 | $1,097 | |
| Major Projects Estimated Spending Profile* | |||
| (billions of Canadian dollars) | Spend to Dec. 31, 2013 |
Remaining Spend | |
| 2014 | 2015 | ||
| Syncrude | $3.5 | $2.0 | $0.6 |
| COS share | $1.3 | $0.8 | $0.2 |
| * Total project costs include both capital costs and certain development costs. Costs exclude capitalized interest. | |||
2014 Budget Highlights
- COS’ 2014 production outlook for Syncrude is 95 million to 110 million barrels (34.9 million to 40.4 million barrels net to COS). The single point production estimate of 105 million barrels (38.6 million barrels net to COS) reflects a planned turnaround of Coker 8-2 and the successful start-up of the new Mildred Lake mine trains.
- Sales, net of crude oil purchases and transportation expense, are anticipated to total about $3.4 billion, based on a WTI crude oil price assumption of U.S.$90 per barrel, a foreign exchange rate of $0.97 U.S./Cdn, and a discount for Synthetic Crude Oil (SCO) to Cdn dollar WTI of $5 per barrel.
- Operating expenses are estimated to total $1.6 billion to produce Syncrude’s blend of fully upgraded SCO. On a per barrel basis, operating expenses are estimated to be $41.48, which includes purchased energy costs of $4.59.
- Based on the budget assumptions, COS estimates 2014 cash flow from operations of $1.2 billion, or $2.39 per share.
- Combined with cash balances and $1.5 billion of undrawn credit facilities, COS is positioned to fund its 2014 capital program and support our dividend, while maintaining net debt within our $1 to $2 billion target range.
| 2014 Budget Assumptions | ||
| Syncrude production (mmbbls) | 105.0 | |
| Canadian Oil Sands sales (mmbbls) | 38.6 | |
| West Texas Intermediate (U.S.$/bbl) | 90.00 | |
| Premium (Discount) to average Cdn$ WTI prices (Cdn$/bbl) | (5.00 | ) |
| Foreign exchange rate (U.S.$/Cdn$) | 0.97 | |
| AECO natural gas (Cdn$/GJ) | 3.50 |
| 2014 Budget Summary | ||
| (millions of Canadian dollars, except per barrel and per share amounts) | ||
| Sales, net of crude oil purchases and transportation | 3,386 | |
| Operating expenses | 1,600 | |
| Operating expenses per barrel | 41.48 | |
| Development expenses | 181 | |
| Crown royalties | 128 | |
| Current taxes | 200 | |
| Other | 119 | |
| Cash flow from operations | 1,158 | |
| Cash flow from operations per share | 2.39 | |
| Capital expenditures | 1,097 | |
The 2014 budget may be impacted by a variety of factors. Some of the more significant variables include, without limitation:
- Crude oil prices: Canadian Oil Sands’ 2014 production is unhedged. Accordingly, COS’ cash flow from operations is highly sensitive to changes in crude oil prices and foreign exchange rates. Every U.S.$1.00 per barrel change in the annual WTI crude oil price impacts cash flow from operations by about $25 million, or $0.05 per share.
- Syncrude production: Timing of turnarounds and maintenance are not always precisely scheduled and unplanned outages may occur. In addition to the impact on production, unplanned maintenance costs can affect operating expenses. The single point production estimate of 105 million barrels (38.6 million barrels net to COS) assumes the Mildred Lake Mine Train Replacement project is completed according to plan with no disruption in production. Every two million barrel change in Syncrude annual production impacts cash flow from operations by about $40 million, or $0.08 per share.
2014 Objectives
COS has established the following objectives for 2014:
- Complete the Mildred Lake Mine Train Replacement project on time and budget.
- Improve reliability over 2013, achieving production of 105 million barrels at Syncrude.
- Achieve 95 per cent completion on the Centrifuge Tailings Management project.
- Maintain a strong balance sheet with a net debt level of $1 to $2 billion.
- Apply for regulatory approval of the Mildred Lake Mine Extension (MLX) project.
More information on Canadian Oil Sands’ 2014 Budget is provided in our 2014 Guidance Document, which is available on COS’ website at the following link:
http://www.cdnoilsands.com/investor-centre/Financial-Reports-and-Filings/GuidanceDocument/default.aspx.
Canadian Oil Sands intends to continue providing quarterly updates to its guidance.
2014 Budget Conference Call
A conference call and webcast will be held tomorrow, December 10, 2013 at 9:00 a.m. MT (11:00 a.m. ET).
To participate in the live call please dial the following number approximately 10 minutes prior to the conference call:
| Toll-free in North America: | 1-888-231-8191 | |
| Calgary and International calls: | 1-403-451-9838
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